01 March 2021

Danny Done, managing director of Portfolio Payroll, outlines what employers need to know and do


The gender pay gap, the difference in the average earnings between men and women, has been a major cause for concern for many decades. Usually felt by women, and although showing signs of closing, the gap remains a symbol of inequality between the sexes. This is why employers are legally required, by the Equality Act 2010, to provide equal pay to both men and women if the work they do is the same or broadly similar; thus, paying them a different rate because of their gender became unlawful.

In April 2017, the difference between earnings for full-time male and female employees, calculated on a median hourly basis, was 9.1%. In an attempt to address this, the government introduced an obligation on employers to publish data on the salary of their male and female employees. Specifically, employers now need to highlight any pay gaps that may exist between the sexes. This obligation exists in the form of the Equality Act 2010 (Gender

Pay Gap Information) Regulations 2017 which took effect on 6 April 2017 and requires employers with at least 250 members of staff to take a ‘snapshot’ of their gender pay data annually.

Due to the coronavirus outbreak, the Government Equalities Office (GEO) and the Equality and Human Rights Commission (EHRC) suspended enforcement of the gender pay gap deadlines for 2019/20, meaning there was no expectation on employers to report their data. However, gender pay gap reporting is expected to make a comeback this year 2021 – but how will it work? Well, ultimately, the law will work in the same way as it has done previously, but the impact of the coronavirus will be felt. The ‘snapshot’ date that employers in the private sector will need to focus on is 5 April 2020, some weeks after the first national lockdown was implemented in England and the job retention scheme had first been rolled out UK-wide.

...UK has one of the largest gender pay gaps in Europe...

Normal rules on producing a report dictate that employees do not need to be included in the ‘reporting pool’ if they were not on full pay on the ‘snapshot’ date. This means that any member of staff who was furloughed and did not have their pay topped up to 100%, can be discounted from the report. The knock-on effect of this may see the reporting pool significantly reduced, meaning that the results it produces may therefore show an increase or decrease in the gap, creating figures not representative of reality. With this in mind, it is crucial that any report produced by employers is combined with a detailed explanation of the figures – if there is a substantial change, employers should explain that this results from the number of staff on furlough and/or the redundancies they have had to make.

Another key issue to bear in mind is the need to have a least 250 members of staff in producing a report.

Employers may have reduced their staffing numbers throughout 2020 and may therefore believe that they are no longer required to produce a report. However, it should be noted that the key date is 5 April 2020. If on that date employers met the criteria to produce a report, they should do so. Again, a staffing reduction may have an impact on the report, so this should also be clearly explained.

The future of gender pay gap reporting

Following the publishing of the first gender pay gap reports in March and April 2018, the Business, Energy and Industrial Strategy (BEIS) committee released a report recommending an increase in the number of employers caught by the reporting requirement. The committee’s report – Gender pay gap reporting – highlights that the UK has one of the largest gender pay gaps in Europe and that employers should commit to closing it.

The report recommends that future action should be taken by the government including clarifying areas of ambiguity, updating guidance, and consulting on introducing requirements to report on disability and ethnicity pay gaps also. As part of amendments to the existing regulations, the report further calls for:

  • the qualifying threshold to be reduced to employers with 50 employees or more, down from 250 employees
  • the introduction of a mandatory narrative where the employer must set out an action plan to address pay gaps, with subsequent reports containing information on the progress of this plan.

The committee’s report contains recommendations that the government can consider when conducting a review of the current gender pay gap regulations. Whilst there is no confirmation that these recommendations will be adopted, there is a growing body of support for the threshold to be reduced and for further pay gap reporting to be introduced.

This year, as the spotlight on coronavirus dims, may be the year that the government conclusively confirms whether these recommendations will be taken on board and how.

 

 

 


Featured in the February 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.